GRATKE WEALTH | Equity Based Compensation Analysis

My Stock Options are Worthless!

Are you sure about that?

Because of the bear market, many stock options appear worthless since the exercise price is above the stock’s current market price. Sure, you can’t cash the option in today. But it still may have value – if you have the luxury of time.

Compute, Analyze, Model, Manage

According to Equilar, a leading compensation consulting firm, more than 70 percent of the nation’s largest companies recently had options with exercise prices above the market. These grants should have been exercised “in the money” if only the optionee had known when to take action. But even stock options like these shouldn’t necessarily be discarded.

We think we can clear up the confusion

From our ‘virtual’ toolbox at GratkeWealth, we can analyze the value of your employee stock options. Factors to consider include price volatility of the underlying shares as well as changes in interest rates to name a few. In the process, we’ll discuss decision points based on your personal goals.

Welcome To our Employee Compensation Analysis tool

We use a system to help you monitor the intrinsic and potential values of your stock options. Our system enables us to alert you so that you may make profitable decisions when those values change, as we know those values will change.

Important alerts are sent by email, notifying us of critical changes in values including stock price, risk/reward ratios, the level of employer stock and options concentration, and deadlines such as upcoming vesting dates, option expiration dates.

Use It Or Lose It

There are several unique attributes to our work, but two stand out. The first is “Forfeit Value.” If you walk away from your job, what equity compensation value is left on the table?

This calculation is valuable to employers, too. In this economic environment, how easy would it be for a would-be employer to say, “hey you have no value in your options where you are, why don’t you come to work for us?”

But wait just one minute. By analyzing the Forfeit Value, which often can be a considerable sum, we can fully illustrate the present value of your options. Yes, your options may still have value, even though they appear under water.

Hold Or Exercise?

The second key concept of our work is what we call the “Insight Ratio” This calculation can be used to determine whether it makes sense to continue to hold the option or to exercise it now.

For example, an Insight Ratio of 10% means that 90% of the option’s value is “in the money” and subject to loss should the stock price decline. Simply put, the current value of the options equates to high risk and low future potential gains: 10% possible upside verses a possible 90% downside.

An Insight Ratio of 90% by contrast, would mean that 90% of the option’s theoretical value will not be realized if exercised today. The current value of the options equates to low risk and high future potential gains: 90% possible upside verses a 10% downside.

Stock Option Administration and Management Valuation
and Strategy Software

For companies or individuals, ask us about our Stock Option Management Software Online Tool. Specifically for companies to help re-establish stock option value for their employees or to manage options of any value. This tool gives executives and employees access to information that helps retain employee loyalty by abating possible misinformation that options are “underwater” or worthless. It helps with calculations that show more true vs. perceived value.

Contact Us

If you have stock options, our analysis is an important tool – especially in the current market environment. For a consultation, please contact David Gratke to begin the discovery process together.